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Utah Life Sciences News & Events

Trump Administration Withdraws Drug Rebate Plan, TV Ad Rule Blocked, “Favored Nation” Drug Pricing, What Next?

July 12, 2019

Rebate Rule Withdrawn
Yesterday, the Trump Administration withdrew a controversial proposed rule aimed at ending many of the rebates that drug companies pay to pharmacy benefit managers (PBMs) and insurers under Medicare. BioUtah, along with its national partners, the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA), had supported the proposal, which would have ensured that these rebates went directly to seniors when they fill their prescriptions. PBMs and insurance companies were strongly opposed.

Rebates negotiated between drugmakers and “middlemen” are largely hidden from the consumer, so that savings negotiated between the parties aren’t transparent or passed onto the consumer. The administration’s proposed rebate rule — a key component of President Trump’s blueprint to lower drug costs — had intended to change that in federal health programs. In a similar vein, Senators Mitt Romney (R-UT) and Mike Braun (R-IL) have introduced legislation, the Prescription Drug Rebate Reform Act of 2019, to address rebates in commercial plans.

BIO’s pPresident and CEO, Jim Greenwood, was not pleased with the decision. “It is deeply disappointing the administration succumbed to the same old scare tactics we see from the insurance industry whenever policymakers aim to address the discriminatory tactics insurers use against patients,” Greenwood said in a statement.

PhRMA also released a statement, calling the administration’s decision “a blow to seniors who could have paid less for their medicines at the pharmacy counter.”

While Health and Human Services (HHS) secretary, Alex Azar, supported moving forward on a final rule, concerns over cost became a significant issue when a Congressional Budget Office report concluded that the plan would cost taxpayers $177 billion over 10 years. Concerns were also raised about the proposal’s potential to increase Medicare premiums.

Judge Blocks Trump Rule Requiring Drugmakers To Disclose List Prices in TV Ads
In another hit to the Administration’s drug pricing strategies, a federal judge ruled on Monday, July 9, that the administration doesn’t have the authority to mandate that drug companies disclose list prices in their direct-to-consumer TV ads. The court decision prevented an HHS final rule from taking effect earlier this week that would have required drugmakers to post the list prices of drugs equal to or greater than $35 for a month’s supply.

Those challenging the HHS rule included Merck & Co., Eli Lilly, and Amgen. Drugmakers have argued that just only providing the list price could mislead consumers because it doesn’t reflect discounts, rebates and insurance payments that would lower the cost.

The decision by U.S. District Judge Amit Mehta in Washington, D.C. rested on legal authority rather than policy. “That policy very well could be an effective tool in halting the rising cost of prescription drugs,” Mehta wrote. “But no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized.” The ruling is likely to be appealed.

What Next?
Some suggest that pulling the plug on the rebate rule will put more pressure on the administration and Congress to consider more extreme policies. For instance, last October, the Department of Health and Human (HHS) services issued an Advanced Notice of Proposed Rulemaking, which proposes to use an index of foreign drug prices to set payments for certain Medicare Part B physician-administered drugs.

In addition, late last week, President Trump said his administration was looking at a possible executive order mandating a “favored nations” policy in which U.S. payments for drugs would be capped at the lowest price paid by other countries. It’s not clear how this “favored nations” executive order would differ from the proposed international pricing index (IPI) pilot being proposed by HHS. BioUtah submitted comments opposing the IPI proposed rulemaking. In February, President Trump gave a nod to drug importation, telling governors in Florida and Colorado. who have signed importation bills, that HHS will look at ways in which these measures can be implemented.

Meanwhile, Congress continues to work on proposals to lower drug prices. One idea being floated to reduce out-of-pocket costs is capping drug copays for Medicare beneficiaries. The Senate Finance Committee is said to be negotiating a bipartisan drug pricing package that would include changes to Medicare’s drug programs.

The Senate HELP and Judiciary Committees have already acted on drug pricing legislation, as has the House Ways and Committee. These committees have taken action to impose stiff drug pricing reporting requirements on drugmakers and to modify patent law. More committees, including the Senate Finance Committee, are expected to act soon.